In brief

The Act of 7 August 2023 on the preservation of businesses and the modernization of bankruptcy law, which came into force on 1 November 2023 ("Act"), has been met with great relief and enthusiasm from practitioners and businesses alike. It finally offers alternatives to the systematic bankruptcy of a company that is unable to pay its debts for lack of liquidity, despite the existence of assets or medium-term growth potential.

In a recent case, the Victorian Supreme Court said that an accountant ‘would know well that a statutory demand involves strict time frames for response and potentially very significant consequences for a company’. The accountant failed to take appropriate steps to inform the company of the statutory demand.

The statutory demand process

If a company does not comply with a statutory demand within 21 days of service, it is deemed to be insolvent and the creditor may proceed to wind up the company.

A recent court decision considers the legal principles and sufficiency of evidence when a court-appointed receiver seeks approval of their remuneration.

A court-appointed receiver needs court approval for the payment of their remuneration. The receiver has the onus of establishing the reasonableness of the work performed and of the remuneration sought.

In brief

On 1 November 2023, the Luxembourg law dated 7 August 2023, issued from Draft Bill No. 6539A on business preservation and modernization of the insolvency law ("Law" or "Reform"), entered into force.

While initial discussions leading to this Reform started about ten years ago¹, the need for suitable instruments to address financial difficulties in businesses was further emphasized by the pandemic, resulting in a notable increase in bankruptcies in Luxembourg since 2021.

In brief

On 15 July 2022, a new law ("Law") amending inter alia the Luxembourg law of 5 August 2005 on financial collateral arrangements, as amended ("2005 Law"), was adopted.

A Supreme Court in Australia has dismissed an application by a UK company’s moratorium restructuring practitioners for recognition of a UK moratorium and ordered that the company be wound up under Australian law.

The decision provides insights into the interaction between cross-border insolvencies and the winding up in Australia of foreign companies under Australian law.

Introduction

In the matter of Hydrodec Group Plc [2021] NSWSC 755, delivered 24 June 2021, the New South Wales Supreme Court:

It is possible for a trustee in bankruptcy to make a claim to property held by a bankrupt on trust. For example, by lodging a caveat over a home that is held on trust.

A trustee in bankruptcy may be able to make a claim, relying on the bankrupt’s right of indemnity as trustee of the trust. This is because the bankrupt’s right of indemnity, as trustee, is itself property that vests in the trustee in bankruptcy under the Bankruptcy Act 1966.

Explaining a trustee’s right of indemnity

In brief

A 139ZQ notice issued by the Official Receiver is a powerful tool for trustees in bankruptcy seeking to recover a benefit received by a third party from an alleged void transaction. These include transactions such as an unfair preference, an undervalued transaction, or a transaction to defeat creditors.

Given the adverse consequences for noncompliance, a recipient of a 139ZQ notice should take it seriously and obtain legal advice without delay.

Section 139ZQ notices

Section 561 of the Corporations Act 2001 (Cth) provides that accrued employee entitlements must be paid in priority to the holder of a circulating security interest in a winding up.

Until recently, it was unresolved whether the property subject to a circulating security interest should be determined as at the date the liquidation began, on a continuous basis, or at some other unidentified date.